After watching governments pour trillions of dollars into the financial system with nothing positive to show for it, Eric Sprott thinks it is time for a new approach.
In his latest "Markets at a Glance" commentary, the famed Canadian hedge fund manager suggested that G20 governments should turn their attention to buying commodities instead. That could provide some much-needed inflationary pressure and job creation in the "real" economy by creating the kind of economic stimulus that bank bailouts have completely failed to deliver.
"We've got to start with something that creates jobs tomorrow, because what's happening is everybody is shutting things down," Mr. Sprott said in an interview.
"And if [governments] said they're prepared to buy this guy's coal and that guy's copper and that other guy's lumber, then people will go back to work. And when people go back to work, they're going to spend money."
Higher commodity prices could also get the economy out of what Mr. Sprott refers to as the "huge deflationary situation" that has wrought havoc on the global economy. That is a stunning shift from earlier this year, when record-high prices for oil and other commodities prompted fears of too much inflation.
Many G20 governments are already talking about large infrastructure projects to try and give their economies a shot of adrenaline. Mr. Sprott thinks these are all good initiatives, but they can take years to get off the ground. By buying the commodities needed for those projects today, a much quicker benefit is possible.
Critics may argue that Mr. Sprott is tooting his own horn with this proposal, since he is one of the world's foremost investors in the resource sector and those investments have contributed to heavy losses in all of his funds that go long the market.
Mr. Sprott does not deny that an enormous effort by G20 nations to pool their efforts and buy commodities would boost his portfolio, but he argued that he is simply trying to come up with a solution for the world's economic woes.
"We're in an economic depression right this minute. We're in it," he said.
He is convinced that pumping more money into the financial system, which does not produce any tangible asset, is a waste of time. Mr. Sprott has long been a critic of over-leveraged banks; he even published a prescient commentary titled "The Financial System is a Farce" last year.
He can only imagine the benefits if those trillions of financial bailout dollars were put into the "real" economy instead.
"The financial system is bringing the real economy down because nobody can get a loan," he said.
"Maybe we've got to spend money on the real economy, not the financial institutions that maybe have to go the way of their errors."
